Sporting bets: a winning strategy from Australia
Gibraltar-based hedge fund Priomha Global has launched a multi-sports strategy investing in sports and events.
Brendan Poots (pictured) will play the Uefa Euro 2016 football championship taking place in France in June and July.
Not as a player nor a staff person, but as manager of the Cloney Global Investments fund he launched and registered in Gibraltar last 17 March with Priomha Global.
The strategy trades long/short sports and events strategies having a directional component and relative value strategy on sports betting exchanges, with registered bookmakers or regulated ‘parimutuel’ licensees.
It is actually copied from the fund Poots has run since 2010 in Australia with his boutique Priomha Capital. Poots, who was formerly a cricket player as well as a bookmaker, says the idea of setting up a sports hedge fund came when completing studies in 2007.
He then started to trade his own money and build algorithms until making it concrete in 2010 with the Australian fund.
“Australia was always a testing ground for the fund. The regulatory bodies restricted growth of the fund, hence I used Australia to build a track record, optimise systems and strategies.
“Towards the start of last year we made the decision to expand to Europe where trading on sports is more commonplace,” Poots explains.
Priomha Global has chosen Gibraltar to settle down in Europe because of its “good banking system” and as lots of professionals operating in the gambling industry are settled there.
Sports events traded in the strategy include football, horse racing, cricket, tennis and golf tournaments. Data scientist Jon Sargent and a team of analysts with experience in sports and investments, work alongside Poots.
Statistics form the core of Priomha Global’s multi-sport strategy, which differentiates between explicit and implicit data.
The explicit data consists of a constantly updated database of all relevant and available statistics built for every sport the firm bets on, while implicit data remains subjective.
The implied probability of an event occurring is automatically converted to a price.
The price determined by the algorithm is then compared to the markets across selected global exchanges, bookmakers and parimutuel markets.
Where the algorithm price is lower than that offered by the available markets, the fund goes for a long position.
If the algorithm price is greater than that offered by the markets, the manager plays it short. In the case the price equals that available in the markets, no investment is made.
Once an event starts, the database will be updating live and new probabilities calculated.
The exposure for a pre-trade event cannot exceed 3% of the assets under management, while in-play investments are restricted to a maximum liability of 1% of AUM.
The fund, seeking to outperform the FTSE 100 and the Global HFRX indices, is expected to manage over £10m (€12.7m) within 12 to 18 months.
Poots argues trading on sports is absolutely non-correlated. According to him, choosing a multi-sport strategy has ensured low volatility returns when establishing the track-record of the Australian fund.
“If we focused on only one sport then returns would be directly related to how we traded that sport,” Poots underlines.
He believes the universe of sports-related investment should be approached without passion. The problem, he says, remains that sport is often a very passionate pursuit.
“Sport is essentially recession-proof and as such it is a good business to be in.”